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I made the $6500 IRA contribution this last year to my

I made the $6500...

I made the $6500 IRA contribution this last year to my standard Ira account. I still owe a lot of tax. I am self employed and have a SEP account that I didn’t contribute to in the last year. Can I put money in the SEP as an additional deduction?

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Answered in 4 minutes by:
3/19/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,639
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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You are able to make SEP account contributions, which will lower your taxable income.

SEP contributions are subtracted from your taxable income using line 28 of the Form 1040.

____

The contributions you make to each employee’s SEP-IRA each year cannot exceed the lesser of:

  1. 25% of compensation, or
  2. $55,000 for 2018 ($54,000 for 2017 and subject to annual cost-of-living adjustments for later years).
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Deduction Limit for Self-Employed Individuals

If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. Compensation is your net earnings from self-employment which takes into account both the following items.

  • The deduction for the deductible part of your self-employment tax.

  • The deduction for contributions on your behalf to the plan.

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Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,639
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
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